BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 400|
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THIRD READING
Bill No: SB 400
Author: Lara (D)
Amended: 6/1/15
Vote: 21
SENATE TRANS. & HOUSING COMMITTEE: 7-0, 4/21/15
AYES: Beall, Allen, Galgiani, Leyva, McGuire, Mendoza,
Wieckowski
NO VOTE RECORDED: Cannella, Bates, Gaines, Roth
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 7-0, 4/29/15
AYES: Wieckowski, Gaines, Bates, Hill, Jackson, Leno, Pavley
SENATE APPROPRIATIONS COMMITTEE: 6-1, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza
NOES: Nielsen
SUBJECT: California Global Warming Solutions Act of 2006:
Greenhouse Gas Reduction Fund California Global
Warming Solutions Act of 2006: Greenhouse Gas
Reduction Fund.
SOURCE: Author
DIGEST: This bill requires the California High-Speed Rail
Authority (HSRA) to allocate not less than 25% of the
appropriated cap-and-trade funds to projects that either reduce
or offset greenhouse gas (GHG) emissions directly associated
with the construction of the high-speed rail project and provide
a cobenefit of improving air quality.
SB 400
Page 2
ANALYSIS:
Existing law:
1)Creates the HSRA to direct development and implementation of
intercity high-speed rail service that is fully coordinated
with other public transportation services. In 2008, voters
approved Proposition 1A authorizing $9.95 billion in general
obligation bonds for the high-speed rail program. Prop 1A
authorizes HSRA to use bond funds for, among other things,
acquisition of rights-of-way, environmental mitigation, and
capital construction of the proposed rail system. In addition
to bond funds, HSRA has also received some federal grants to
partially fund the construction of the system.
2)Enacts the Global Warming Act of 2006 (AB 32, Nunez, Chapter
488, Statutes of 2006), which requires the California Air
Resources Board (ARB) to establish a statewide GHG emissions
limit such that by 2020 California reduces its GHG emissions
to the level they were in 1990. Thereafter, ARB must adopt
the maximum feasible and cost-effective reductions in GHG
emissions for sources subject to AB 32.
As one of its key AB 32 implementation programs, ARB has
adopted the Cap-and-Trade Program. Under this program, ARB
establishes an overall limit - or "cap" - on GHG emissions
from specified industries. Facilities subject to the cap may
reduce their own emissions or purchase allowances from others
to emit GHGs, including from facilities that have reduced
emissions more than required. In essence, the Cap-and-Trade
Program uses market forces in an attempt to reduce GHG
emissions in the most economically efficient manner.
3)Authorizes, as part of the Cap-and-Trade Program, ARB to
auction off GHG emission allowances as mitigation fees. To
date, ARB has completed 10 auctions, taking in a total of $1.6
billion in proceeds. These funds may only be used to
facilitate the achievement of GHG emission reductions in
California consistent with AB 32. The Department of Finance,
in consultation with ARB and other relevant state agencies,
must develop a three-year investment plan for these funds, but
ultimately the Legislature and governor appropriate the funds
through the annual budget process.
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Page 3
4)Requires, pursuant to SB 535 (De Leon, Chapter 830, Statutes
of 2012) the Department of Finance, when developing the
three-year investment plan for cap-and-trade monies, to
allocate 25% of these funds to projects that provide benefits
to disadvantaged communities, and to allocate a minimum of 10%
of available cap-and-trade monies to projects located within
disadvantaged communities. The bill outlines a process to
identify these communities and allows for periodic
modification as necessary.
5)Establishes, pursuant to SB 862 (Committee on Budget and
Fiscal Review, Chapter 36, Statutes of 2014), a long-term
cap-and-trade expenditure plan by continuously appropriating
portions of the funds for designated programs or purposes.
Among other things, SB 862 continuously appropriates 25% of
the annual proceeds from cap-and-trade to HSRA for various
project components of the high-speed rail program, including:
a) Acquisition and construction costs
b) Environmental review and design costs
c) Other capital costs
d) Repayment of any loans made to the authority
This bill:
1)Requires HSRA to allocate not less than 25% of the
appropriated cap-and-trade funds to projects that either
reduce or offset GHG emissions directly associated with the
construction of the high-speed rail project and provide a
cobenefit of improving air quality.
2)Requires HSRA to prioritize allocating this funding for
measures and projects in communities that are located in areas
designated as extreme nonattainment.
Comments
Purpose. According to the author, many of the communities along
the proposed high-speed rail route are in regions that are
disproportionately impacted by poor air quality. Residents
living in close proximity to heavily congested transportation
corridors, for example, already suffer adverse health effects
from increased emissions. While the high-speed train might
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reduce future emissions once operational, there is an
opportunity for HSRA to use some of the cap-and-trade funds to
help impacted communities today. This bill prioritizes projects
that reduce GHG emission in these affected regions, consistent
with promises HSRA has made throughout the course of the
system's development.
Cap-and-trade funding. As previously stated, cap-and trade
revenues may only be used to facilitate the achievement of GHG
emission reductions in California consistent with AB 32. In
fact, the Constitution requires that a clear nexus exist between
an activity for which a mitigation fee is used and the adverse
effects related to the activity on which that fee is levied.
Therefore, in order for the state's use of cap-and-trade funds
to be valid as mitigation fees, revenues from the cap-and-trade
auction must be used to mitigate GHG emissions or the harms
caused by GHG emissions. A pending lawsuit challenges the
state's use of these revenues on these grounds.
With that in mind, it is important that legislation allocating
cap-and-trade revenues ensure that the funds are being used to
reduce GHG emissions. If opponents of the program can convince
the courts that the revenues are not being used appropriately,
the entire cap-and-trade program could be jeopardized.
In June 2013, HSRA submitted to the Legislature a report
outlining the high-speed rail program's contribution to the
state's goal of reducing GHG emissions. The report declares
that by 2022, the first year the state plans to operate
high-speed trains along the initial operating segment, the
direct emissions reduction will be the equivalent of taking
31,000 passenger vehicles off the road. Before operation,
however, the construction of the system will produce some
significant, yet-to-be-determined amount of GHG emissions. HSRA
states in its report that it will fully offset these emissions
through mitigation efforts such as planting trees in the Central
Valley and providing funds to local air districts for other
emission-reduction projects.
The 2013 report was submitted prior to the Legislature enacting
SB 862 and committing 25% of all future cap-and-trade revenues
to the high-speed rail program. Undoubtedly HSRA has updated
its plans to reduce GHG emissions before operation of the system
begins in order to ensure that expenditure of any cap-and-trade
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funds are meeting the program's intended purpose. This bill
greatly contributes to that aim by requiring HSRA to spend at
least 25% of any cap-and-trade revenue on the reduction of GHG
emissions.
To further clarify what types of GHG emission reduction projects
HSRA could propose, the bill includes a list of example projects
eligible for this funding, such as:
1)Transit projects that reduce congestion by improving public
transportation service or frequency of service
2)Transportation improvements that reduce congestion, including
network improvements and roadway modifications
3)Alternative transportation options, including infrastructure
projects that support clean transportation, facilitate
increased bicycle and pedestrian use, and improvements that
connect bicycle and pedestrian routes to transit facilities
4)Natural systems, including forests and urban forests, that
reduce GHG emissions or increase the sequestration of carbon
to mitigate the impacts of GHG emissions and create greater
climate resiliency
5)The use of low- and zero-emission equipment for transportation
and construction
State and federal environmental laws. Typical transportation
projects in California are vetted through an environmental
process in which both state and federal environmental laws
apply. It is generally considered more challenging to comply
with state environmental laws than the federal laws, primarily
because California often requires project sponsors to not only
identify environmental impacts but also to develop a plan to
mitigate those impacts.
The projects comprising the high-speed rail program are not
typical state transportation projects in this case. In 2013,
the U.S. Surface Transportation Board, a federal adjudicatory
body with regulatory oversight of the nation's railroads, ruled
that it has superior jurisdiction over the California high-speed
rail program's environmental clearance process. This ruling
exempts HSRA from state environmental laws because federal law
supersedes state requirements. Despite this ruling, HSRA has
committed to following the state's environmental processes as if
it were still subject to them.
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Unfortunately, the Legislature appears to have overlooked this
commitment with the drafting of SB 862, as it does not make
mitigation of environmental impacts an eligible use of
cap-and-trade funds for the high-speed rail system. This bill
takes steps to resolve this inconsistency by making GHG emission
reduction projects eligible for cap-and-trade funding.
FISCAL EFFECT: Appropriation: Yes Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, unknown costs
pressures to the Greenhouse Gas Reduction Fund (special) as a
result of expanding the eligible uses of the Greenhouse Gas
Reduction Fund that are continuously appropriated for the
project.
SUPPORT: (Verified5/29/15)
None received
OPPOSITION: (Verified5/29/15)
None received
Prepared by:Eric Thronson / T. & H. / (916) 651-4121
6/1/15 19:06:10
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